Council draws up plans to bulk buy private rental properties

Tuesday 26th July 2011

A local council is considering buying up large swathes of private rental accommodation in a bid to crack down on unscrupulous landlords and offer longer, more secure tenancies.

It would then become the landlord itself of these properties, hoping to see rising capital values and good rental income.

If the plans comes off, Newham Council in London would effectively ‘nationalise’ the local private rented sector.

The authority wants to set up an investment vehicle to buy up poor-quality private rented sector properties. It could also use cash from institutional investors, including the council’s own pension fund. Currently, although local councils are having to make budget cuts, borrowing is cheap.

There are 35,000 private rental properties in the borough. Exactly how the scheme would work is not yet clear, including whether the council could use some kind of compulsory purchasing powers.

The plans form part of a new lettings policy, due for consultation early next year, whereby the council would prioritise allocating social housing to employed people ahead of those on benefits.

In an interview with the magazine Inside Housing, Sir Robin Wales, Newham’s directly elected mayor, said: “It is clear to us that we have to stabilise the [private] sector or we will just become a transit camp. That’s why we want to invest – there is a logic driving us.

“We want to purchase property in the private sector and run our own private rented sector. That way we can have longer tenure. That is a big issue for me.”

Sir Robin said buying private sector properties would also increase the council’s options for housing people on benefits.

In 2006, Newham Borough Council launched its own housing association, Local Space.

It used private finance to buy properties on the open market to rent to homeless people on long leases. It ran into controversy when questions were asked about its procedures, and its then chief executive resigned. It has also come under fire for the cost of its own offices in what is one of the most deprived boroughs in the UK.